MOSL: DALMIA BHARAT (Buy)-EBITDA in line, capacity expansion on track
DALMIA BHARAT: EBITDA in line, capacity expansion on track
(DALBHARA IN, Mkt Cap USD2.2b, CMP INR815, TP INR1020, 25% Upside, Buy)
- Decline in realizations impact margins: 2QFY20 cement volumes were up 8% YoY to 4.47mt while blended realizations were down 1.6% YoY (-10% QoQ) to INR5,002/t, led by weak pricing in the South/East. Revenue grew 7% YoY to INR22.3b. EBITDA stood at INR4.7b (in line with est.) with margin at 21% (+2.6pp YoY; -5pp QoQ). Company has changed the method of depreciation in its north-eastern capacities from straight line to written-down value method from 1st Jul'19. As a result, depreciation charge for 2QFY20/1HFY20 is higher by INR670m/INR840m and deferred tax credit for 2QFY20 and 1HFY20 is higher by INR290m due to higher reversal of depreciation during the tax holiday period. EBITDA/t stood at INR1,063/t (+13%YoY;-27%QoQ). Adj. PAT after minority interest stood at INR 270m v/s -INR10m in 2QFY19.
- Concall highlights: (a) Slag prices for the quarter stood at INR1,095/t v/s INR1,180/t in 1QFY20 and INR1,385/t in 2QFY19. (b) Petcoke prices stood at USD84/t during 2QFY20 v/s USD87/t in 1QFY20 and USD106/t in 2QFY19.
- Strong 1HFY20 performance: Revenue/EBITDA/PAT were up 7%/25%/3.3% YoY to INR48b/INR11.4b/INR1.7b. We expect revenue/EBITDA to grow 5%/9% in 2HFY20, while PAT should decline 42%.
Dalmia Bharat Limited is an India-based holding company. The Company operates as a cement manufacturing company. The Company's segments include Own Manufactured Cement, Refractory, Management Services and Others. The Company's brands include Dalmia DSP, Dalmia, Dalmia Ultra, Dalmia Super Roof, Vajram and Konark. The Company manufactures cement for use in lining of oil wells, airport strips and railway sleepers, among others. The Company owns a 5.5-megawatt capacity solar power plant at Medinipur, West Bengal. The Company also owns thermal power plants, co-generation plants and wind farms. The Company has manufacturing facilities in approximately 11 locations with an installed capacity of 25 million tons per annum. The Company's subsidiaries include Dalmia Power Limited, Adwetha Cement Holdings Limited, Kanika Investment Limited and Dalmia Cement (Bharat) Limited.
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